No money, no problems? Blizzard axes 'Diablo 3' auction house

Blizzard is doing away with its controversial virtual economy for "Diablo 3," the company announced this week.

Blizzard Entertainment, the creator of popular video game franchises like "StarCraft" and "World of Warcraft," has long been a pioneer in developing increasingly sophisticated virtual worlds in which its fans can romp around. But after nearly two years of headaches, the gaming giant is putting one of its most controversial and ambitious ideas to rest. On Tuesday, Blizzard announced that it is closing down the auction house for "Diablo 3" next year.

On a Battle.net post, John Hight, "Diablo 3's" game production director, wrote that while the company "initially designed and implemented the auction houses" in order to "provide a convenient and secure system for trades," the system ended up undermining "Diablo's core gameplay: kill monsters to get cool loot."

The virtual in-game economy had essentially "short-circuited" the "core reward loop" of "Diablo 3" by making it easier and more rewarding to access big-ticket items through the game's auction block instead of actual gameplay. Rather than continue to tinker with it, Blizzard will shut down the auction house entirely come March 18, 2014.

This brings one of the company's most high-profile struggles with its most passionate fan to an uneasy close. In July of 2011 — just under a year before "Diablo 3" hit the shelves and became the fastest-selling PC game of all time — Blizzard dropped a bombshell on "Diablo" players: the new game would feature an internal economy to allow people to trade virtual items using both virtual currency (gold coins gathered by killing monsters and selling loot) and real-world money.

It sounded like a neat idea, and even promised to give the best "Diablo" players a chance to make some extra cash on the side by pursuing their favorite hobby. But it came with a big string attached: in order to prevent piracy, the game would have to be online at all times.

This angered gamers who had no particular interest in either using the auction house or playing the game online. Even worse for Blizzard, none of the systems really worked. Much like the disastrous launch of "SimCity" which followed, "Diablo 3" suffered from numerous crashes and lags that frustrated players to no end. And even when the game's servers did manage to stay up and running, this controversial digital rights management (DRM) didn't do much to make gamers feel secure, especially after they were beset by hackers who made off with their virtual gold stashes.

"It's not easy being a bank," Edward Castronova, a Professor of Telecommunications at Indiana University Bloomington and scholar of virtual economies, wrote on his personal blog. And while it may sound like a thoroughly unceremonious end to a long and contentious struggle between a game maker and its most passionate fans, Castronova said, "it's a good thing too" because it saved the company from future headaches.

"By embedding real money in its service, Blizzard was vitiating any claim that D3 was separate from the real economy and therefore not subject to real world taxes and laws," Castronova wrote. "What a terrible precedent that would have made."

He added in an email to NBC News that abandoning the auction house shows that the Blizzard "will do anything, and get rid of anything, to help gameplay."

Money problems aside, Blizzard is still won't relent on "Diablo 3's" always-online requirements. A representative from the company told NBC News in an emailed statement that the company has no plans "to implement an offline mode," saying that the" auction house was never the driving factor in our decision to make the PC version of 'Diablo III' require an Internet connection."

Yannick LeJacq is a contributing writer for NBC News who has also covered technology and games for Kill Screen, The Wall Street Journal and The Atlantic. You can follow him on Twitter at @YannickLeJacq and reach him by email at: Yannick.LeJacq@nbcuni.com.